UGM Economist Highlights Inequality in Economic Growth Distribution

UGM economist Denni Puspa Purbasari, Ph.D., states that Indonesia is not only facing global economic pressures but also domestic challenges that require serious response to ensure economic growth is evenly distributed. She notes that high levels of consumer spending do not fully reflect a healthy economic condition. She highlights that worker income has only risen by 2.2%, while consumption has grown by 5.5%, indicating a disparity in the distribution of economic growth. ‘We must ensure economic growth is truly distributed across society. Consumption should not rise because people are relying on loans to maintain purchasing power,’ she said at the ‘Seminar on ASEAN Regional Economic Outlook and Fiscal Policy’ on Tuesday (26 May) at the FEB UGM campus. She warned that this situation could become a dangerous trap for Indonesia’s economy if prolonged, urging the government to strengthen fiscal policies, particularly in improving budget allocation efficiency and maintaining national fiscal sustainability. Denni also highlighted that high government spending without corresponding revenue growth poses risks to fiscal sustainability. ‘If expenditures continue to rise without strengthening revenue, it could pose a major risk to Indonesia’s fiscal resilience,’ she explained. Furthermore, she pointed out the quality of foreign direct investment (FDI) in Indonesia. She noted that Indonesia’s challenge is not only attracting foreign investment but also ensuring it boosts domestic industry productivity and capacity. ‘We have not yet been able to utilise incoming foreign investment to truly enhance national economic productivity,’ she concluded. Regarding ASEAN, she said the region’s economic changes now hinge on challenges vastly different from a decade ago. The shifts are not merely cyclical, such as interest rate hikes or commodity price fluctuations, but more fundamental structural changes. ‘Previously, our economic model relied on globalisation, innovation, low production costs, and relatively stable global demand. Now the situation is different. We face fragmentation, strategic competition between nations, climate change, and technological advancements,’ she said. Denni explained that ASEAN’s current challenges are not just about maintaining economic growth or regional resilience, but also determining the right development model amid ongoing global uncertainty. She noted that shifts in the global economic structure are influencing market demand patterns, including in Indonesia. She added that current market demands are increasingly shifting towards specific sectors, requiring more adaptive and inclusive development strategies. ‘What we need now is not just inclusivity at the ASEAN regional level, but within Indonesia itself,’ she concluded. (H-2)